My brother is doing some home renovation and has asked to borrow some money. I've loaned fiat to him in the past and he's always paid me back ahead of time and with interest. He's a trustworthy dude and I have no problems lending him money.
However, I don't have extra fiat laying around and I don't want to cash out any bitcoin. My thought is to loan him, let's say 0.5btc, and tell him that I want 0.5btc back in 6-18 months. I'm not looking for yield. I'm totally fine if bitcoin goes down in fiat terms when he pays me back - like I said, I'd just be hodl'ing anyway. It'd be dope for my bro if he got 12k.
My concern is if bitcoin goes up too much. If it goes up a bit and he pays me 15k loan, that's no big deal - I'm sure he's good for it. But, what if bitcoin goes up like crazy and he needs to spend $100k to buy 0.5btc to give back to me? I'd feel bad to make him pay that back, but it'd also not be fair for me to have a smaller stack.
What do folks think? Will bitcoin not move too much over the next 6-18 months? Should I not loan bitcoin regardless of the situation? Any other risks to consider?
A big no
If you want equal BTC in the future and he sells it today to pay for things in fiat he’s going to default on you for sure.
Anyone who doesn’t manage to acquire 100,000,000 satoshis over the next year will probably never acquire that much in their lives.
No, ask for a loan against your bitcoin instead, Give him the cash, Ask him for the cash Done
Smart! A few others have said the same thing. It seems like the best approach. Thanks!
If you are a custodial risk taker, Loan fiat against your bitcoin on unchained and have him make the payments.
Interesting. This may be the better way to do it. Thanks for the comment!
Please also consider how you distribute downside risk; if bitcoin drops severely in price, your position could be partially liquidated. Will your loanee help to make you whole?
Oef, too much can go wrong here and way too much drama for me
Have you considered a P2P loan against your Bitcoin on hodlhodl? Get the stables and give it to your brother to pay back?
I hadn’t thought of it. Someone mentioned similar so I’m looking into it now - seems like the better route. Thanks!
It is impossible to know with any degree of certainty what will happen in the coming months. Anyone who tells you otherwise is lying. The market sentiment is bullish, but that doesn't guarantee anything. Besides the intention being good, I wouldn't do it for the reasons you already mentioned.
Assume it will go up. I wouldn't risk it
I do not advise this
another way to think about this risk here:
If he were to borrow bitcoin from you for 18 months and have to pay it back in equal bitcoin, then he's effectively buying an 18 month PUT option on BTC.
Would you short BTC from now until the next 18 months? What premium would you put on that risk? That's the risk value/cost.
Home renovation doesnt seem like a productive business...
If it was for like a liver transplant...yea
Home renovation? Hard no. That is simply a luxury. Bitcoin is on the verge of a potential mega rally. Have him wait 2 years.
There is this thing called cash that would eliminate any possibility of what you are worried abt happening...from ever happening.
True, except for if I have cash laying around I’d buy bitcoin so I’m in the same boat. Cash now = Bitcoin now.
But youd give this bitcoin to your brother, then hed liquidate it and have to pay you back in btc terms ? Instead of just liquidating it yourself, then making him the fiat loan ?
If I liquidate I’d pay cap gains. I’d also lose my stake in bitcoin - so I’d miss out on any price rally.
Based on other comments, seems the best is to use something like Unchained Capital to get a loan with my Bitcoin as collateral, while my bro pays back Unchained.
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